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Metals Stocks: Gold climbs back above $1,800 as Powell backs tapering bond purchases this year

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Gold futures climbed back above the key $1,800-an-ounce mark in Friday dealings, after remarks from Federal Reserve Chairman Jerome Powell, at the Jackson Hole center-bankers symposium, revealed that he supports tapering the pace of bond purchases this year, but continued to see high inflation as “transitory.”

In prepared remarks, Powell said “at the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.”

The Fed is buying $80 billion of Treasurys and $40 billion of mortgage-backed securities each month to put downward pressure on long-term interest rates and boost demand in the economy.

In the speech on Friday, however, Powell did not discuss when the Fed might formally announce the taper, or slow down, of the pace of bond purchases.

The overriding interest in Powell’s speech was on whether he “intimates the Fed’s $120 billion [a] month Treasury note and mortgage bond buyback program will be pared in the near future,” Jeff Klearman, portfolio manager at GraniteShares, which offers the GraniteShares Gold Trust
BAR,
+0.79%
,
told MarketWatch. “Any comments suggesting tapering sooner than later could mean the Fed is now ready to moderate its ultra-accommodative monetary policy and provide impetus for asset prices, including gold prices, to fall.”

Following the speech, however, the U.S. stock market and gold prices traded higher, he said. “Though Powell stated the Fed planned to moderate its easy-money monetary policy later this year, he also said it was his belief recent high inflation was transitory, seeming indicating any change would be moderate.”

“Moderate changes in the Fed’s monetary policy is likely to leave real and nominal rates at or near historical lows supporting all asset prices, including gold,” said Klearman.

December gold
GCZ21,
+0.79%

GC00,
+0.79%

 rose 0.5%, or $8.70, to reach $1,803.90 an ounce, following a 0.2% gain on Thursday, with the precious metal headed for a weekly gain of over 1% based on the most-active contract, according to FactSet data.

Fawad Razaqzada, market analyst at ThinkMarkets, also pointed out that Powell “confirmed that it ‘could’ be appropriate to begin tapering this year, but re-iterated that it doesn’t carry direct rate-hike timing signal.”

“This was interpreted by the market as the Fed Chair offering no fresh news and people who had betted on him providing some clear tapering timeline were left disappointed,” said Razaqzada.

The Jackson Hole event was being held virtually due to concerns about the delta variant of COVID-19.

Ahead of Powell’s comments, Atlanta Fed President Raphael Bostic on Friday said he was focused on conditions in the labor market. The voting member of the Federal Open Market Committee’s told CNBC in an interview that the U.S. economy is “very close” to the substantial progress benchmark needed to start tapering its asset purchases but “a lot depends on what happens in the next couple of months.”

His remarks are part of a parade of Fed speakers slated for Friday, including the Fed’s No. 2 Richard Clarida at 2 p.m. The remarks also come after statements Thursday from a trio of non-voting central bank officials, including Kansas City Fed President Esther George, Dallas Fed President Robert Kaplan and St. Louis Fed President James Bullard, who all said they’d favor tapering sooner than later.

Meanwhile, silver for September delivery
SIU21,
+1.53%

was trading 18.5 cents, or 0.8%, higher at $23.74 an ounce, with a weekly gain of 2.7% in sight for gold’s sister metal. The December silver contract
SIZ21,
+1.52%
,
which is also among the most active, traded at $23.81 an ounce, up 21.4 cents, 0.9%.

The most-active December copper contract
HGZ21,
+1.41%

added 1.7% to $4.33 a pound, with the contract up by close to 5% for the week.

October platinum
PLV21,
+2.61%

rose 2.1% to $996.30 an ounce, poised for a small weekly rise of 0.2%. December palladium
PAZ21,
+1.11%

traded at $2,427.50 an ounce, up 1.5% in Friday dealings, and trading up over 6% for the week.

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